Markets Expecting ECB to Leave Rates Unchanged Tonight

AUD

The Aussie Dollar fairs a little worse against most majors this morning in a continuation of choppy trading conditions since Tuesday’s RBA rate hike announcement. Asian Equities were higher across the board with the Hang Seng the top performer up +2.2%, the Shanghai Comp up +0.7% and the NIKKEI up +1.0%. While in Aussie equities the ASX finished the session up +0.4%, despite financials falling to a 3-month low, off the back of resources. In Commodities Gold was down -0.2%, while Iron Ore had a healthy rise of +0.5%. Quite light on in local data out of Aus today with little to be seen on the macro-economic calendar until next week Thursdays’ Unemployment figures. China’s Trade Balance will be the focal point of todays regional news, with some economic analysts expecting a small rebound in exports and import growth after Covid related supply chain disruptions had eased in May. The contraction in the national freight index had narrowed in May, and the manufacturing PMI rebounded from the low in April. Following the Chinese Trade balance, forecasted higher than last print followed by M2 Money Supply y/y and New Loans data. AUDEUR clients should consider implications of tonight's ECB meeting (see below).

USD

The Aussie is down against the Greenback, struggling to maintain the 0.72 handle amid volatile trading conditions and risk-off market sentiment, now trading at 0.71910. US equities traded lower overnight with the S&P 500 leading the way down -1.1%, while the NASDAQ closed in the red, down -0.7%, with the Dow Jones fairing similarly down -0.8%. Meanwhile US yields edged higher while crude oil climbed 2.4% to $122.25 a barrel. In US macro-economic news last night we saw the Trade Balance better than expected at -87.1B against forecast -89.6B and a previous of -107.7B. Shortly after the Treasury Secretary Janet Yellen hit the wires commenting that China is guilty of unfair trade practices, although some tariffs on Chinese goods do not serve US strategic interests. She continued by saying she wants to reconfigure Chinese tariffs to be more strategic. Looking ahead the main US item of the day will be US Unemployment Claims at 10:30 tonight predicted to be slightly above previous, however most eyes will be firmly focussed on the ECB's rate decision.

EUR

The Aussie peels off against the Euro today in anticipation of tonight’s ECB Monetary Policy Statements currently trading at 0.6709 at time of writing. European equities were mixed on the open with Eurostoxx 50 in the green +0.5, FTSE100 up +0.2%, while the DAX was down -0.3%. In Germany, Industrial Production rose 0.7% MoM in April, missing expectations of 1.2% while Final Employment Change q/q printed a little above expectation at 0.6% against a forecast and previous of 0.5%. Euro-area GDP grew 0.6% in 1Q, double the initial estimate. The OECD has cut the global growth forecast to 3% in 2022, 2.8% in 2023, while doubling inflation forecasts to 8.5% in 2022, 6.5% in 2023. Looking ahead tonight we will see the release of the EU’s much anticipated June Cash Rate decision and accompanying press conference. The ECB is set to announce an end to bond purchases this week and formally begin the countdown to an increase in borrowing costs in July. This should be a sudden transition away from negative rates and should transform the Euro’s prospects with the European central bank not having increased the cash rate since 2011, meaning this could be quite a historic event for the Eurozone. Money Markets say no change to rates tonight but a total of 75bps worth of increases by September.

GBP

The AUDGBP pair trading sideways in lacklustre trading conditions, trading at 0.5736 at time of writing. In Equities the FTSE was slightly in the red at close, down -0.1%. It has been quite light-on in terms of Macro-economic news over the last few days, and today remains not all too dissimilar. We did see the print of the Halifax HPI m/m above expectations and the Construction PMI relatively unchanged, while the 10-y Bond Auction came in at 2.30|2.8. Not much else on the cards for the region for this week until next week Monday when we will begin to see a number of GDP, Trade, Production and Manufacturing releases.

NZD

The Aussie Dollar holds its post-RBA 4-year high strength against the NZD, trading at 1.1154 at time of writing. Quite slim in terms of macro-economic data as is usual from the NZ region with Manufacturing Sales q/q print due tomorrow morning but with nothing significant enough to influence the market out of the region until next Thursday's GDP q/q print.